Iva or DMP

Lauramags64

Hi all,
Completed SC budget and with 45k debt between myself & hubby, a new baby, soon to pay nursery fees, plus my hours changing from full to part time...SC suggested either an IVA or DMP and we are unsure what's best to go for.

We are currently both out of pension (hubbys been out it for 5 years) & want to go back I'm it. Can an IVA force us back out? We're both teachers so the pension is set, we can't chose to pay a lower percentage.

Does anyone have experience with both IVA and DMP? We like the sound of IVA as after 6 years well be debt free whereas with DMP it will be 11 years. However, I'd like more children and not sure how flexible the IVA is with lowering payments for a while for maternity/nursery costs etc.

We need help deciding what to go for :-s :eek:

sourcrates

Hi,

A DMP is the most flexible, as you choose who and how much to pay, and it's non regulated, however 11years is a long time.

An IVA however, although more rigid, gives you legal protection from your creditors, you can vary your payments, but they must be caught up with again, unless your creditors agree a permanent reduction.

Your budget is agreed beforehand for both options, whatever it may be.

Without knowing the full picture it's difficult to recommend one above another, I have done both, the IVA gave the most piece of mind.

Hope this helps.

Lauramags64

Thanks for your reply. Hope you don't mind me asking so many questions:

1) Is it possible to have a 6month break and add it on to the end of the IVA?

2) Will having an IVA have a negative impact when it comes to renewing car insurance, phone contracts etc?

3) We don't like the idea of re-mortgage to release equity. Is it most likely we'll be refused anyway & then just pay an extra year?

4) If say we do have another child & can't afford the monthly payments, can we go off the IVA and onto a DMP or is this just too much of a nightmare/virtually impossible?

Thanks :-)

sourcrates

Lauramags64 wrote: »

Thanks for your reply. Hope you don't mind me asking so many questions:

1) Is it possible to have a 6month break and add it on to the end of the IVA?

2) Will having an IVA have a negative impact when it comes to renewing car insurance, phone contracts etc?

3) We don't like the idea of re-mortgage to release equity. Is it most likely we'll be refused anyway & then just pay an extra year?

4) If say we do have another child & can't afford the monthly payments, can we go off the IVA and onto a DMP or is this just too much of a nightmare/virtually impossible?

Thanks :-)

(1) six months break is not unheard of, and may still be within the realms of your IP`s discretion, without referral to your creditors.

(2) Wont affect car insurance, or any other insurance, wont affect a phone contract as long as its an upgrade, as they do not require a credit check.

(3) Most people get refused a re-mortgage, and have to pay an extra year.

(4) An IVA is a formal insolvency solution, should you default on the payments, its possible your creditors could sue for your bankruptcy. Thats the worst case scenario, it is possible you could get away without that happening, but you should be made aware of the potential consequences of non payment.

National Debtline is the place to get answers to specific IVA questions if your unsure about any particular aspect.

Lauramags64

Thanks so much for taking the time to answer all questions. Will call them tomorrow to go over everything to make sure it's the best option for us.

Best regards

CocteauTwin

Hi
I would think long and hard before you embark on an IVA. They sound ideal and any company would gladly want your business.
However, it's a massive financial straight-jacket that lacks the flexibility of a DMP. The annual review is intrusive as the companies want to maximise their cut. The IP caseworker changes many times throughout the 5 or 6 years which leads to inconsistent information. Any salary increases, overtime or inheritance goes straight 'in the pot' without any deductions to your monthly payments.
I had an IVA with Payplan. They couldn't do enough at first. Two years in and they badgered me more and more. Can I change energy supplier etc... with letters demanded I provided evidence for everything which I did. Ultimately it's up to you but I would try to talk anyone out of this 'nuclear option'.

Good luck though ;-)

sourcrates

CocteauTwin wrote: »

Hi
I would think long and hard before you embark on an IVA. They sound ideal and any company would gladly want your business.
However, it's a massive financial straight-jacket that lacks the flexibility of a DMP. The annual review is intrusive as the companies want to maximise their cut. The IP caseworker changes many times throughout the 5 or 6 years which leads to inconsistent information. Any salary increases, overtime or inheritance goes straight 'in the pot' without any deductions to your monthly payments.
I had an IVA with Payplan. They couldn't do enough at first. Two years in and they badgered me more and more. Can I change energy supplier etc... with letters demanded I provided evidence for everything which I did. Ultimately it's up to you but I would try to talk anyone out of this 'nuclear option'.

Good luck though ;-)

My experiance was quite the opposite to that.

I hardly heard from my IP, annual review was very simple, and budget was agreed without too much trouble.

I agree it can be a lottery with these companies, and it certainly pays to do your homework first.

DorisTrousers

I am sorry for the experience CocteauTwin had, but the bare fact is that he or she got out of debt in a set time, whereas with a DMP there is never a set time. I have heard numerous tales of creditors, as people near the end of DMP's, adding interest that had previously been frozen as the balances had reduced back under credit limits etc. Court action is common, charging orders a distinct possibility. A DMP is a request to creditors to help, an IVA an obligation. It is for the individual to decide which option suits best, but certainly be mindful of the pros and cons of both.

An IVA is intrusive to the point that it is a contract between debtor and creditor, the terms of which are clear to all at the outset. It is incorrect to say that any salary increases go into the pot. They cannot be ignored, but if annual review is in December and you get a salary increase in January, then you will not need to pay extra until the next review the following December. Even then, a new financial statement is produced to take account of all changes to budget and only 50% of the difference is required to be paid in. If you are, net, £100 better off then you keep £50 and pay £50 over. Hardly unfair is it? As for overtime, the equation is 10% untouched, then the rest 50/50. For someone normally earning £1500, and then one month taking home £1700, the extra to be paid is a one off £25. Is that unreasonable? I certainly don't think so, you cannot expect to have your cake and eat it. You cannot champion the "flexibility" of DMP's and how you may be able to clear them quicker if you have extra and then moan that if you have extra on an IVA you have to put some in. One of the reasons that the free sector DMP organisations struggled so much, and some still are in some cases, to gain full authorisation from the FCA is that they have a duty, even on a DMP, to review circumstances at least annually and were not doing so robustly enough. Where debtors can afford more after a review but refuse to pay, then organisations have been instructed by the FCA that they should no longer help the debtor with a DMP. The effects of this will start to be felt around summer or autumn of this year, meaning that, effectively, bang goes your "flexibility" on a DMP. It is also incorrect to say that payments cannot be reduced on an IVA, they can and are where necessary. As for inheritances and windfalls, would any sane person use those to pay off troublesome debt first? Assumedly so, so why use that as a reason not to do an IVA?

I am certainly not anti DMP, they are a useful tool in the fight against unaffordable debt, but my own view is that they should really only ever be a short or medium term solution. Anything other than that and you need to give serious consideration to a statutory solution, whether BR, IVA or DRO.

Johnsmith2016

I'd say there is a better option than the DMP.

Need more info - how is the 45k split between you two ?

Assets - how much etc

SOA

I'm rarely a fan of IVA's and think most of the time they are not the best option provided to the individual and are Miss sold (imo), but in your case it could very well be, as you have something to protect and both earning a wage .

11yr is too long to be messing around with this imo .

Firstly speak to the debt charities for impartial advice .

Lauramags64

Hi, sorry for the delay and thanks all for your responses. Just spoke to stepchange IVA department. They recommended IVA. Here's our situation:
£49,124 debt
£30,700 husbands
£16,851 mine
£1,573 joint.

Have surplus of £400 each month.
We'd pay back 38% of debt and write off £30,000; which in theory sounds great.

My main fear is the flexibility of it. We were advised that we can have a payment break or reduced payments if a good reason (e.g another child) and that creditors would more likely accept this rather than lesson more if making us bankrupt. We were told that if any time we think IVA is not suitable them we fail it & go on DMP. Has anyone done this or know of anyone who did this successfully?

To be honest I'm scared of both options & wish we weren't in this situation at all. House value is £170,000 but still £157,000 on mortgage. Hoping we're not forced to remortgage :-s

Lauramags64

Also, do you think we are best to do a DMP first to allow us better flexibility to have another baby, then an IVA as apposed to an IVA now, then having to have the variation meeting?